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Preliminary reviewed condensed consolidated results for the year ended 31 August 2015
CLICKS GROUP LIMITED
Registration number: 1996/000645/06
Share code: CLS
ISIN: ZAE000134854
CUSIP: 18682W205
PRELIMINARY REVIEWED CONDENSED CONSOLIDATED RESULTS
for the year ended 31 August 2015
Group turnover up 15.3%
Diluted headline EPS up 14.0%
Cash generated by operations R1.7 billion
Total dividend up 23.7%
Total shareholder return 35.8%
Return on equity of 53.7%
COMMENTARY
OVERVIEW
The Clicks Group has delivered another good trading performance in a difficult
economic climate where consumers remain under financial pressure. All the group's
retail brands reported real volume growth and the Clicks chain has continued to gain
share of the health and beauty markets. UPD now has market-leading positions in both
the pharmaceutical wholesale and distribution markets.
Diluted headline earnings per share increased by 14.0% to 383.9 cents. The total
dividend was increased by 23.7% to 235.0 cents per share, based on the reduced
dividend cover ratio of 1.7 times. The group generated a total shareholder return
of 35.8% for the year.
In line with the board's commitment to return surplus cash to shareholders, the
group returned R667 million to shareholders through dividend payments of R491 million
and share buy-backs of R176 million. Over the past five years the group has returned
R3.3 billion to shareholders.
FINANCIAL PERFORMANCE
Group turnover increased by 15.3% to R22.1 billion, with retail sales growing by
10.4% and UPD by 21.6%. Selling price inflation was contained to 4.0% for the year.
Total income increased by 10.9%. The faster turnover growth in UPD has resulted in
the group's total income margin reducing to 26.0% from 27.0% in 2014.
Operating expenses in retail were 10.1% higher primarily due to the increased
investment in stores, staff and marketing costs. Comparable retail cost growth was
contained at 8.0%. UPD expenses grew by 8.4% owing to increased variable costs from
the growth in its distribution business and by 6.1% on a comparable basis.
Group operating profit increased 14.6% to R1.4 billion. The retail business, which
accounts for 82% of group profit, improved its operating margin by 30 basis points
to 7.8%. UPD increased operating profit by 17.0% although the increase in the
lower-margin generics business continues to place pressure on the margin, which
reduced 10 basis points to 2.5%. The margins are all within the group's medium-term
target ranges.
Inventory days in stock moved from 64 to 68 days. Inventory levels were 24.3% higher
as the group focused on improving product availability in the retail brands and
bought stock for the expansion of the franchise brands in Clicks. UPD stock levels
were higher than expected and have normalised subsequent to the year-end.
Cash inflow from operations before working capital changes increased by R209 million
to R1.7 billion. Capital expenditure of R370 million was invested mainly on store
expansion and refurbishment, IT systems and infrastructure.
The group's performance for the year translated into a sector-leading return on
equity of 53.7%.
TRADING PERFORMANCE
The Clicks chain increased sales by 10.9% and by 7.9% in comparable stores, driven
through effective promotions and price competitiveness. The chain's store footprint
was expanded to 486, with 361 pharmacies and 157 clinics. The Clicks ClubCard loyalty
programme has grown its active membership to 5 million.
The group's portfolio of exclusive health and beauty franchise brands, The Body Shop,
GNC and the recently launched Claire's brand, continue to differentiate the Clicks
offer. The Body Shop increased turnover by 12.7% and has 50 standalone stores, with a
presence in 86 Clicks stores. GNC has four stores and a presence in 257 Clicks stores,
while Claire's opened its first store and has ranges available in 77 Clicks stores.
Musica increased sales by 2.3%, with strong growth in gaming and technology, as the
brand continued to gain market share.
UPD benefited from the growth in its preferred supply chain partner distribution
contracts and increased turnover by 21.6%. Fine wholesale turnover grew by 7.4% and
distribution turnover by 34.6%.
OUTLOOK
Consumer spending is unlikely to improve in the short term, which will ensure that
the retail trading environment remains constrained. UPD is expected to face a
demanding year owing to the ongoing margin pressure from the faster growth in
generic medicines.
However, the group has a portfolio of strong, market-leading brands which have the
capacity to increase market share over the medium term.
The group will continue to invest for long-term growth, with record capital
expenditure of R432 million planned for the year ahead. Clicks will open 20 to 25
new stores and 25 to 35 new pharmacies, with 50 stores to be refurbished.
Management is confident of the group's ability to continue to generate cash and to
achieve its medium-term financial targets.
FINAL DIVIDEND
The board of directors has approved a final gross ordinary dividend of 169.5 cents per
share (2014: 136.5 cents per share) and a 23.5 cents per ordinary "A" share
(2014: 19.0 cents per share). The source of the dividend will be from distributable
reserves and paid in cash.
ADDITIONAL INFORMATION
Dividends Tax (DT) amounting to 25.425 cents per ordinary share and 3.525 cents per
ordinary "A" share will be withheld in terms of the Income Tax Act. Ordinary
shareholders who are not exempt from DT will therefore receive a dividend of
144.075 cents net of DT and ordinary "A" shareholders will receive a dividend of
19.975 cents net of DT.
The company has 246 137 763 ordinary shares and 29 153 295 ordinary "A" shares in
issue. Its income tax reference number is 9061/745/71/8.
Shareholders are advised of the following salient dates in respect of the final dividend:
Last day to trade "cum" the dividend Friday, 15 January 2016
Shares trade "ex" the dividend Monday, 18 January 2016
Record date Friday, 22 January 2016
Payment to shareholders Monday, 25 January 2016
Share certificates may not be dematerialised or rematerialised between Monday,
18 January 2016 and Friday, 22 January 2016, both days inclusive.
The directors of the company have determined that dividend cheques amounting to
R50.00 or less due to any ordinary shareholder will not be paid unless a written
request to the contrary is delivered to the transfer secretaries, Computershare
Investor Services Proprietary Limited, by no later than close of business on Friday,
15 January 2016, being the day the shares trade "cum" the dividend. Unpaid dividend
cheques will be aggregated with other such amounts and donated to a charity to be
nominated by the directors.
By order of the board
David Janks
Company Secretary
22 October 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
R'000 Year to Year to
31 August 31 August %
2015 2014 change
Revenue 23 285 096 20 203 300 15.3
Turnover 22 070 092 19 149 524 15.3
Cost of merchandise sold (17 545 318) (15 026 159) 16.8
Gross profit 4 524 774 4 123 365 9.7
Other income 1 210 082 1 048 279 15.4
Total income 5 734 856 5 171 644 10.9
Expenses (4 338 817) (3 953 943) 9.7
Depreciation and amortisation (237 670) (219 871) 8.1
Occupancy costs (619 023) (564 469) 9.7
Employment costs (2 255 417) (2 033 605) 10.9
Other costs (1 226 707) (1 135 998) 8.0
Operating profit 1 396 039 1 217 701 14.6
(Loss)/profit on disposal of property,
plant and equipment (9 446) 29 687
Profit before financing costs 1 386 593 1 247 388 11.2
Net financing costs (57 309) (40 660) 40.9
Financial income 4 922 5 497 (10.5)
Financial expense (62 231) (46 157) 34.8
Profit before taxation 1 329 284 1 206 728 10.2
Income tax expense (374 709) (341 883) 9.6
Profit for the year 954 575 864 845 10.4
Other comprehensive income/(loss):
Items that will not be subsequently
reclassified to profit or loss 765 -
Remeasurement of post-employment
benefit obligations 1 063 -
Deferred tax on remeasurement (298) -
Items that may be subsequently reclassified
to profit or loss
Exchange differences on translation of
foreign subsidiaries 4 777 (236)
Cash flow hedges 33 238 (11 584)
Change in fair value of effective portion 46 164 (16 087)
Deferred tax on movement of
effective portion (12 926) 4 503
Other comprehensive income/(loss) for the year,
net of tax 38 780 (11 820)
Total comprehensive income for the year 993 355 853 025
Profit attributable to:
Equity holders of the parent 954 575 864 612
Non-controlling interest - 233
954 575 864 845
Total comprehensive income attributable to:
Equity holders of the parent 993 355 852 792
Non-controlling interest - 233
993 355 853 025
Earnings per share (cents) 396.7 352.4 12.6
Diluted earnings per share (cents) 381.5 347.4 9.8
HEADLINE EARNINGS RECONCILIATION
R'000 Year to Year to
31 August 31 August %
2015 2014 change
Total profit for the year attributable to
equity holders of the parent 954 575 864 612
Adjusted for
Loss/(profit) net of tax on disposal of
property, plant and equipment 6 801 (26 250)
Insurance recovery income net of tax on
property, plant and equipment (921) -
Headline earnings 960 455 838 362 14.6
Headline earnings per share (cents) 399.2 341.7 16.8
Diluted headline earnings per share (cents) 383.9 336.8 14.0
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R'000 As at As at
31 August 31 August
2015 2014
Non-current assets 2 009 163 1 771 636
Property, plant and equipment 1 221 658 1 135 007
Intangible assets 395 625 371 623
Goodwill 103 510 103 510
Deferred tax assets 177 037 126 335
Loans receivable 13 003 12 540
Financial assets at fair value through profit or loss 16 668 22 621
Derivative financial assets 81 662 -
Current assets 5 546 775 4 420 621
Inventories 3 249 914 2 614 196
Trade and other receivables 1 871 616 1 607 659
Cash and cash equivalents 400 738 195 631
Derivative financial assets 24 507 3 135
Total assets 7 555 938 6 192 257
Equity and liabilities
Total equity 2 012 807 1 566 973
Non-current liabilities 308 503 286 465
Employee benefits 128 035 115 336
Deferred tax liabilities - 2 782
Operating lease liability 180 468 168 347
Current liabilities 5 234 628 4 338 819
Trade and other payables 4 898 114 4 041 261
Employee benefits 214 943 190 494
Provisions 5 745 9 882
Income tax payable 115 826 94 342
Derivative financial liabilities - 2 840
Total equity and liabilities 7 555 938 6 192 257
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
R'000 Year to Year to
31 August 31 August
2015 2014
Operating profit before working capital changes 1 699 743 1 490 840
Working capital changes (15 451) 354 925
Net interest paid (39 025) (30 978)
Taxation paid (355 520) (350 204)
Cash inflow from operating activities before
dividends paid 1 289 747 1 464 583
Dividends paid to shareholders (490 758) (429 277)
Net cash effects from operating activities 798 989 1 035 306
Net cash effects from investing activities (369 381) (299 096)
Capital expenditure (369 547) (336 854)
Other investing activities 166 37 758
Net cash effects from financing activities (224 501) (632 745)
Purchase of treasury shares (176 264) (285 146)
Acquisition of derivative financial assets (48 237) -
Treasury share cancellation costs - (3 244)
Interest-bearing borrowings repaid - (344 355)
Net increase in cash and cash equivalents 205 107 103 465
Cash and cash equivalents at the beginning of the year 195 631 92 166
Cash and cash equivalents at the end of the year 400 738 195 631
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R'000 Year to Year to
31 August 31 August
2015 2014
Opening balance 1 566 973 1 376 838
Purchase of treasury shares (176 264) (285 146)
Treasury share cancellation costs - (3 244)
Dividends paid to shareholders (490 758) (429 277)
Total comprehensive income for the year 993 355 853 025
Share-based payment reserve movement 119 501 55 542
Acquisition of non-controlling interest - (765)
Total 2 012 807 1 566 973
Dividend per share (cents)
Interim paid 65.5 53.5
Final declared/paid 169.5 136.5
235.0 190.0
SEGMENTAL ANALYSIS
The group's reportable segments under IFRS 8 are Retail and Distribution.
R'000 Profit
before Total Capital Total
Turnover taxation assets expenditure liabilities
Twelve months to
31 August 2015
Retail 14 757 724 1 150 684 3 475 535 280 322 2 386 819
Distribution 10 415 301 258 578 4 698 119 27 758 3 635 137
Inter-segmental (3 102 933) (13 223) (1 973 273) - (1 947 914)
Total reportable
segmental balance 22 070 092 1 396 039 6 200 381 308 080 4 074 042
Non-reportable
segmental balance - (66 755) 1 355 557 61 467 1 469 089
Total group balance 22 070 092 1 329 284 7 555 938 369 547 5 543 131
Twelve months to
31 August 2014
Retail 13 369 083 1 000 119 3 070 544 234 844 2 390 715
Distribution 8 563 104 220 960 3 492 247 47 041 2 667 547
Inter-segmental (2 782 663) (3 378) (1 347 924) - (1 337 715)
Total reportable
segmental balance 19 149 524 1 217 701 5 214 867 281 885 3 720 547
Non-reportable
segmental balance - (10 973) 977 390 54 969 904 737
Total group balance 19 149 524 1 206 728 6 192 257 336 854 4 625 284
R'000 Year to Year to
31 August 31 August
2015 2014
Non-reportable segmental profit before taxation consists of:
(Loss)/profit on disposal of property, plant and equipment (9 446) 29 687
Financial income 4 922 5 497
Financial expense (62 231) (46 157)
(66 755) (10 973)
SUPPLEMENTARY INFORMATION
As at As at
31 August 31 August
2015 2014
Number of ordinary shares in issue (gross) ('000) 246 138 246 138
Number of ordinary shares in issue including
"A" shares issued in terms of employee share
ownership programme (gross) ('000) 275 291 275 291
Number of ordinary shares in issue
(net of treasury shares) ('000) 239 884 242 260
Weighted average number of shares in issue
(net of treasury shares) ('000) 240 603 245 364
Weighted average diluted number of shares in issue
(net of treasury shares) ('000) 250 204 248 892
Number of ordinary shares purchased ('000) 2 376 4 620
Net asset value per share (cents) 839 647
Net tangible asset value per share (cents) 631 451
Depreciation and amortisation (R'000) 248 054 229 703
Capital expenditure (R'000) 369 547 336 854
Capital commitments (R'000) 432 300 369 700
ACCOUNTING POLICIES AND NOTES
1.1 These condensed consolidated financial statements for the year ended 31 August 2015
have been prepared in accordance with the requirements of the JSE Limited Listings
Requirements for preliminary reports and the requirements of the Companies Act
of South Africa. The Listings Requirements require preliminary reports to be
prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards ("IFRS")
and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting
Standards Council and to also, as a minimum, contain the information required by
IAS 34 - Interim Financial Reporting.
Ernst & Young Inc., the group's independent auditor has reviewed the preliminary
condensed consolidated financial statements contained in this preliminary report
and has expressed an unmodified review conclusion on the preliminary condensed
consolidated financial statements. Their review report is available for inspection
at the company's registered office together with these preliminary condensed
consolidated financial statements identified in the auditor's report. These condensed
financial statements have been prepared under the supervision of Mr M Fleming CA(SA),
the Chief Financial Officer of the group.
The accounting policies used in the preparation of the financial results for the
year ended 31 August 2015 are in terms of IFRS and are consistent with those
applied in the Audited Financial Statements for the year ended 31 August 2014.
1.2 Related party transactions for the current year are similar to those disclosed
in the group's annual financial statements for the year ended 31 August 2014.
No significant related party transactions arose during the current year.
1.3 Under the general authorities granted by shareholders, 2 375 515 shares were
repurchased during the current year.
1.4 The carrying value of all financial instruments approximates fair value. All
financial instruments are held at amortised cost, with the exception of derivative
instruments that are accounted for at fair value through profit or loss. The fair
value of financial instruments that are not traded in active markets are determined
by using valuation techniques; if all significant inputs required to fair value an
instrument are observable, the instrument is included in level 2. All financial
instruments accounted for at fair value through profit or loss are considered to
be level 2 investments and there have been no transfers between levels 1, 2 and
3 during the year.
1.5 The majority of the non-current derivative financial assets are to hedge
obligations under the cash-settled share compensation scheme.
Registered address: Cnr Searle and Pontac Streets, Cape Town 8001
PO Box 5142, Cape Town 8000
Directors: DM Nurek* (Chairman), F Abrahams*, JA Bester*, BD Engelbrecht, M Fleming
(Chief Financial Officer), F Jakoet*, DA Kneale# (Chief Executive Officer), NS Matlala*,
M Rosen*, KDM Warburton^
* Independent non-executive # British ^ Resigned 28 January 2015
Registration number: 1996/000645/06
Income tax number: 9061/745/71/8
Share code: CLS
ISIN: ZAE000134854
CUSIP: 18682W205
Transfer secretaries: Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown 2107
Sponsor: Investec Bank Limited
www.clicksgroup.co.za
Date: 22/10/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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